Local

State needs $550 million Malloy OKs line of credit to keep government operating BY PAUL HUGHES REPUBLICAN-AMERICAN

HARTFORD — Gov. Dannel P. Malloy is authorizing a temporary $550 million line of credit to make sure the cash-strapped state government can pay its bills.

The governor's precautionary move Monday underscored the budget difficulties that confront the Democratic administration and the legislature. Spending demands continue to exceed tax receipts and other revenue.

"This line of credit is essentially a low-cost buffer that makes sense given everything that we're facing," State Treasurer Denise Nappier said Tuesday.

She recommended taking the step in a letter dated Monday to Malloy and the legislature's two budget committees.

The state government operates from a common cash pool that mingles tax receipts, federal grants and other revenues with borrowed funds. The treasurer's office is allowed to temporarily transfer operating and capital funds.

State law authorizes temporary borrowing to meet the state's obligations when the government's coffers are running low.

As a precaution, Nappier advised Monday that it would be prudent under the current circumstances to arrange for short-term financing to manage the state's cash needs.

She stated in her letter that she had established stand-by lines of credit for $550 million with several banks. Under state law, the treasurer's office needed the governor's approval to proceed with the stop-gap financing plan. It was granted late Monday.

Nappier said Tuesday that there is no timetable for drawing on the line of credit. It is available if needed.

Republicans in the legislature seized on the development to criticize Malloy and majority Democrats over their handling of state finances

"This fresh move toward yet another swipe of the state's credit card should be a wake-up call to every member of the legislature who believes Connecticut is on the right path," said Rep. Craig Miner, R-Litchfield, the ranking House Republican on the Appropriations Committee. "This clears up any debate about whether our state has lived beyond its means. We're limping along, month-to-month."

The governor's office argued that taking out this temporary line of credit is not the same as borrowing to pay for ongoing operating expenses.

"This is a short-term line of credit that will cost the state relatively little and allow necessary payments to be made if the treasurer elects to access it," said Andrew Doba, a Malloy spokesman.

The administration did not announce that Malloy had authorized Nappier to formalize the line of credit.

"It wasn't our announcement to make," Doba said.

State law required the governor to inform the bipartisan leadership of the legislature's budget committees that he had approved the temporary borrowing plan. The law does not mandate any public notice be given.

The treasurer's office posted Nappier's letter, but did not otherwise publicize the request.

Rep. Sean Williams, R-Watertown, said he finds it curious that the governor's office did not make a public announcement. He is the ranking House Republican on the Finance, Revenue and Bonding Committee.

"We should not be too surprised about this," he said.

He noted that Nappier informed Malloy that she had transferred $366 million in bond proceeds to the common cash pool through Nov. 30. The fiscal year started July 1.

REPUBLICANS HAVE BEEN raising questions about the adequacy of the state's cash reserves, so it was unlikely they would have let Monday's move by Malloy pass without bringing attention to it.

House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, did exactly that Tuesday when he criticized what he called a lack of transparency about the state's finances.

Cafero said Republicans have been asking for projections about the state's cash flow for months now. He called upon the treasurer's office to offer a detailed accounting of the state's cash position and how it intends to use the line of credit.

The governor's action Monday came on the same day that State Comptroller Kevin Lembo reported that a projected shortfall in this year's $20.5 billion budget is $50 million higher than the Malloy administration's latest estimate.

The budget gap is $415 million, according to the comptroller's office. The governor's office is disputing the higher estimate.

The administration reported a $365 million shortfall in its monthly budget estimate for November. It represented a six-fold increase from its October estimate.

Lembo informed Malloy on Monday that the projected shortfall has triggered a state law that requires him to propose to lawmakers a plan for bringing the budget back into balance.

The Democratic governor is expected to submit his plan to the Democratic-controlled legislature in the next couple of weeks. The law gives him until Dec. 31.

Malloy and lawmakers are facing bigger budget gaps of roughly $1 billion a year in the upcoming two-year budget cycle. The governor will be recommending a two-year budget plan in February that closes those holes.

" So let me get this straight, I'm confused. The State maxed out its Master Card. It then applied for a Visa Card to pay off the Master Card. Instead of paying off the Visa Card with the Master Card it maxed out the Master Card Too! Now in order to pay off BOTH the Master Card AND Visa Card, the State applied for Discover Card and did the same with that card. At present the State is in the process of applying for an American Express Card so it can max that one out too. I wish I could run my household budget in this fashion. With that kind of money I too can bribe corporations to stay in Connecticut if they promise to hire 300 people over the next 20 years.I also could promise no layoffs to state workers for the next 4 years. I could also build a "Magic Busway" and High Speed rail line from New Haven to Springfield.Wake up Hartford sooner or later these credit cards are going to have to be paid. "

" Art, I think you got that all about right. I guess however I am puzzled by why you would be confused. None other than Denise Nappier says given the mess we are in it makes sense.......... So I guess it makes sense!!!!!! I mean don't we elect these people to these offices because they are so good at what they do?? :-) "

" Too bad all the states can't have their own money. Then we could just quantitative ease the money out of thin air. This is the most ingenious system of money. If they were to cut the number paid in your check they might need a hearing, a vote, or at least an explanation. But we all know as we shop they accomplished this through trickery. Like three card Monty, you never know where the next hit is coming from. "

" Temporary.? Line of credit? How do you get a line of credit with no equity or negative equity? I thought the amount was 468 mil!!?..Connecticut is one large ATM. Maybe a little cash out, as it is the holiday season. This state is one hot mess. "

Post a reader comment

We encourage your feedback and dialog. Please be civil and respectful.If you're witty, to the point and quotable, your reader comments may also be included on the Around the Towns page of The Sunday Republican. Readers must be registered and logged in to post comments on the site. Registration is free. Click Here to register.
A Subscription is not required to post comments only a Registration.